24 July 2003

Royal Returns

In a rare interview, Yos Euarchukiati tells Eric Ellis how a benevolent monarchy is being rescued from old-world deals

YOS Euarchukiati is an unlikely revolutionary.

Rich, urbane and schooled at London's prestigious University College, Yos is a respected member of the Thai establishment. His central Bangkok office, from where he advises Thailand's royal family, overlooks two dazzling palaces. The air around the softly spoken ex-banker is rarified, to say the least.

Yos might walk with kings but he's no less a radical. His blue-blooded connections have helped him shake up one of Asia's most powerful -- and most secretive -- institutions: the Crown Property Bureau. And help keep Thailand's revered monarchy afloat.

The 1997-98 financial crisis didn't just hurt ordinary Thais. The aristocracy were hit too. Unlike their European counterparts, who are mostly sustained by taxes, Thailand's royals pay their own way.

And they do so via the CPB, created in the 1930s when Thailand was transformed from an absolute monarchy -- the royal family owned literally everything -- to the constitutional monarchy it is today.

The CPB isn't supposed to make profits, just fund the royals from its portfolio. It inherited about half of downtown Bangkok and owns controlling stakes in blue-chips like Siam Cement and Siam Commercial Bank, which boast royal origins.

That might seem like an impressive portfolio: it's been conservatively valued at $40 billion, but the CPB's officials have traditionally been better at protocol than at being investment managers. Indeed, some of the CPB's commercial arrangements date back decades, and at land rents that were cheap even then. Bangkok's police headquarters, for example, sited on a prime Bangkok lot the size of a football field, is rented from the CPB for around 1000 baht ($40) a year. That's for the police, says Yos, but it's not much different in the private sector.

Peppercorn rents were great for tenants but ripe for exploitation. The CPB owns some of Asia's best land but has rarely benefited from it. Before the crisis, its Bangkok leaseholds were trading at crazy prices.

The CPB didn't go broke but it was forced to borrow heavily to keep the monarchy's holdings aloft. Part of the problem is the monarchy's sense of itself as the nation's benefactor. Sure, tenants needed approval to sell CPB leases but the agency gave it automatically. The same was true for equity investments. When the bureau was invited to buy shares, it often did.

But selling them was another matter, lest it be seen as a lack of royal confidence or distrust. It just doesn't do in the court of Siam for the royals to be making money at the expense of their subjects.

Enter Yos, who's been a CPB adviser since the mid-90's but, post-crisis, expanded an undeclared charter to modernise what he describes as the enigma of the CPB. He's technically not the CPB boss -- that job goes to a long-standing director and courtier -- but Yos, a 58-year-old retired banker, has the business smarts -- and another important ally. "I have the trust of His Majesty and that enables me to at least introduce certain ideas".

His role is extremely subtle in the gentle court of the monarchy. Yos' "certain" idea was quite radical; to raise the rents on CPB tenancies to levels approaching fair market value, and impede the transfer of leases.

"People were able to buy and sell leases and the CPB didn't get the benefit. The practice has now been stopped. This is very significant."

Yos, whose family owned Thailand's Bank of Asia before selling to ABN-AMRO, rejects suggestions he's the royal corporate doctor. But many in Bangkok's investment community see him as modernising a creaking -- and seemingly untouchable -- institution with guile and sensitivity.

Says one foreign banker, "Yos has instilled some order to a portfolio that had been neglected."

He's also helped improve Bangkok's skyline, where as many as 300 buildings are unfinished victims of the crisis. The World Trade Centre, overlooking the CPB-owned Royal Turf Club in downtown Lumpini, was designed in 1996 to be one of Thailand's tallest buildings. But it's been an eyesore since its developer got into financial trouble. But the CPB has negotiated a new tenant, Central Pattana, and the complex's once-struggling mall is now packed with shoppers. Work has even begun to finish the planned 64-floor tower.

But while the CPB's new rent policy has helped out even Bangkok's re-born property market, it's made the bureau unpopular in some quarters. "A lot of people think they have been robbed," Yos says. "The hard work is getting the people to go along with this change of policy. People today should pay proper rents."

The CPB's structure has also been streamlined. Once a monolith with tenuous control over its assets, the bureau's holdings have been transferred to a new entity, CPB Equity. Another new division, CPB Property, manages the land portfolio. Yos is a director of both. There's even two foreigners -- an American and a New Zealander -- on the CPB Equity board. It's even permissible to sell holdings. Still, for all Yos' modernisation, the CPB is hardly a paragon of transparency.

Its finances are known to only a handful; the king and a board of aristocratic courtiers and ex-politicians. Thailand's Finance Minister, also a director, is a benign influence. "We cannot be viewed through a Western prism," Yos says. "Problems arise when the Western counties try to impose their values into an another society. "We are transparent in our own way, to survive the judgment of the big boss, the king."